Amplify ETFs CEO backs value stocks as tech large caps taper

Amplify CEO Christian Magoon speaks during a press conference held in western Seoul on Tuesday. [SAMSUNG ASSET MANAGEMENT]

As the "Magnificent Seven" stocks — tech large caps including AI front-runner Nvidia — likely face a slowdown from their peak last year, value stocks with higher dividends are emerging an appealing alternative, suggests the CEO of U.S. exchange traded fund (ETF) sponsor Amplify ETFs.

“We think there's some concentration risks in the Magnificent Seven,” said Christian Magoon, chief of the ETF sponsor with assets worth approximately $9 billion under management, during a press conference held at the Korea Exchange in western Seoul on Tuesday.

“We should have some caution on the Magnificent Seven that perhaps their outsized return and their outsized market cap [...] may not be able to be sustainable in the short term,” he warned.

Moreover, with a more gradual U.S. rate cut in sight, “areas to keep a lookout for as being outperformers would be the value stocks,” suggested the CEO, adding that companies with high free cash flows, a measure of stability and financial strength, will likely be favorable options.

Magoon also forecast that the upcoming U.S. presidential election will drive stock prices, citing historical data showing that “across equity and fixed income [assets], we see dramatically skewed positive returns.”

Addressing a question about the main drivers behind the "Korea discount," which refers to a chronic undervaluation of stocks listed on local markets, the CEO mentioned the country’s status as an “emerging market” on the Morgan Stanley Capital International global index as one of the potential factors.

Magoon said that designating the country as such instead of classifying it as a developed market is “offensive,” although he acknowledged that geopolitical uncertainties involving North Korea remain a major concern for overseas investors.

Amplify is one half of a strategic partnership with Samsung Asset Management, which acquired a 20 percent stake in the U.S. ETF sponsor in April 2022 and listed Asia’s first blockchain ETF based on Amplify’s BLOK ETF on the Hong Kong Exchange three months later.

More recently, Amplify listed the Amplify Samsung SOFR ETF on the New York Stock Exchange in November of last year based on the Samsung Kodex U.S. Dollar SOFR Active ETF, which began trading in Korea in last March.

“I expect that we’ll launch some additional products in Korea, at least in the next year,” said Magoon.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]